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Home > Investments > ETFs & Trackers

Product review: iShares Japan ETF

While a rocky market historically, Japan’s fortunes are looking up. This low cost passive investment provides a route in

By Laura Suter | Published Aug 01, 2012 | comments

Offering a chance to access the Japan equity market without the risk of currency fluctuations is iShares’s new ETF.

The iShares MSCI Japan Monthly GBP Hedged ETF will look to mimic the performance of the MSCI Japan index, which tracks stocks in the Tokyo Stock Exchange, Osaka Stock Exchange, JASDAQ and Nagoya Stock Exchange.

Each month the securities will be hedged back into sterling, with the goal of avoiding the big peaks and troughs of the currency yo-yos we have been seeing lately.

This ETF will be physically backed, with individual equity investments from around 300 Japanese companies, though iShares said it will be focused on industrial, discretionary and financial companies.

Stephen Cohen, head of iShares’s EMEA investment strategies and insights team, said, “Through this fund, investors can take a new look at Japan, with the knowledge they will receive flexible, cost-efficient and transparent exposure to Japanese equities with in-built protection against currency movements.”

The TER is 0.64% and, as with all ETFs, no IFA commission is offered.

MM View:

Japan has never been a favoured place for the masses to invest, having a rocky economic history and a 20-year bear market until 2009.

While things started looking up at that point, further bumps in the road – from the earthquake to the global economic crisis and fears of a eurozone fallout – have meant the ride has been far from smooth.

However, since 2009 the Nikkei 250 index has been on a steady climb upwards. It’s still far from its former highs, but that means there is still room left to capitalise on the gains, should this trend continue.

Spending on infrastructure to repair damage from the earthquake, a relative shelter from some of the global economic problems and proposed changes to some fiscal policies all shape up to paint a more attractive picture of Japan.

But, while past performance is not a guide to the future, investors need to be prepared for a rocky ride. The Nikkei 250 lost more than 80% from peak to trough in the late 90s to early 00s. If that happens again, investors won’t be left with much to comfort themselves with.

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